JULY 2017

Orient Aviation - www.orientaviation.com

Long before his appointment as president and CEO of All Nippon Airways this year Yuji Hirako was seen as a future leader of the carrier. A 36-year veteran of the airline, his strategic touch is evident in many areas of ANA’s business today.

Looking younger than his 59 years, Yuji Hirako, a fluent English speaker, has been appointed to the top job at All Nippon Airways (ANA) at a time when the carrier is seeking to consolidate its position as Japan’s leading airline.Read More »

As Japan Airlines faltered in recent years, ANA shook off its perennial label as Japan’s second international carrier and surged past its long-term rival.

'My biggest mission is to settle these shortcomings with our airport operations and our flight operations. I have to make ANA more resilient'

Yuji Hirako
All Nippon Airways president and CEO

In 2015, five years after JAL had sought government support to keep flying, ANA became the country’s biggest airline in international passengers carried, no mean feat for a company that did not start scheduled international flights until March 1986, from Tokyo to Guam, 32 years after JAL’s first foreign flight, from Tokyo to San Francisco, in March 1954.

Clear evidence of ANA’s ambitions is the airline’s international expansion from 29 destinations five years ago to 43 cities in May this year. International flights have increased from 966 a week to 1334 weekly, provided by all ANA Group flights except its low-cost carriers, Peach Aviation and Vanilla Air.

Hirako personally oversaw the introduction of routes from Tokyo to Seattle, San Jose and Vancouver, when he was ANA’s senior vice president, The Americas, based in New York, from 2012 to 2015. The airline will increase Tokyo-Los Angeles to three daily in October.

An economics graduate from prestigious Tokyo University, Hirako has taken over at the airline as the ANA group began implementing its latest mid-term plan, to 2020. He has been recognized as a major contributor to the carrier’s future strategy and carries big expectations for the group. In its latest fiscal year, the group announced a record operating income of 145.5 billion yen (US$1.3 billion) for its latest 12 months to March 31.

Increased cost efficiency, improved passenger service and lower fuel costs were the major contributors to the impressive results. An 11.6% increase in international passenger traffic boosted revenue as the carrier continued its international expansion to new destinations -Wuhan, Phnom Penh and Mexico City.

“We also have developed our dual hub model to improve domestic to international links at Tokyo’s Haneda Airport and international transfers at Narita Airport,” Hirako told Orient Aviation in Tokyo last month.

For the fifth consecutive year, ANA has been awarded a 5-Star rating from Skytrax, the highest category of airline rating issued by the airline services company.

The ANA Group fiscal year operating income target is 200 billion yen, which Hirako aims to achieve by increasing profits from the core airline business on international routes and maintaining domestic market share. He also intends to reorganize the international freighter network to improve its revenue.

'One of Hirako’s recent suggestions was that Japan inbound tourism would benefit from code sharing between airlines and railway companies, notably the Japan Rail companies that operate the Shinkansen or “Bullet trains”. If we are to grow in the inbound market we need to change our ways of thinking. Dreams can come true'

Yuji Hirako
All Nippon Airways president and CEO

ANA will benefit from the performance of its LCCs, which are forecast to produce a near ten-fold increase over their 2015 results and achieve three times greater projections for growth than predicted in January last year.

To make this happen, ANA has consolidated its former LCC subsidiary, Peach Aviation, and wholly-owned budget carrier, Vanilla Air, with full service ANA. Kansai-based Peach, Japan’s first LCC, was launched in March 2012 and was the country’s first LCC to record a profit.

Despite the change in corporate status, Peach will retain its management independence. “Peach Aviation's excellent achievement is the result of its own unique management style. They capture customers we don’t have. For example, 70% of their international customers are foreigners. Where ANA can best help Peach is by supporting its aircraft acquisition and fuel contracts,” Hirako said.

The Japanese LCC market has room to grow and in Peach and Vanilla ANA has independent brands that provide services distinct from their full service parent. They allow ANA to tap into previously unrealized domestic demand and provide low-cost options for inbound international travelers looking to explore Japan.

Last year, Hirako said, three per cent of ANA’s domestic travelers were non-Japanese. He expected that number to double.

Hirako has a reputation as an “ideas man”. He is admired for his very personable leadership style, which takes him to the front lines of the airline’s operations rather than relying on reports.

One of his recent suggestions was that Japan inbound tourism would benefit from code sharing between airlines and railway companies, notably the Japan Rail companies that operate the Shinkansen or “Bullet trains”.

“If we are to grow in the inbound market we need to change our ways of thinking. Dreams can come true,” he said.

Such a radical concept needs the full support of the railways, he agreed. “It comes from Germany where there are successful air/rail code shares in operation. Why not Japan?” he asked.

Leading ANA through its up-dated corporate plan is Hirako’s primary task and he is dedicated to fixing two fundamental operational issues that damaged the carrier’s domestic reputation in 2016.

The first was an IT outage in March of that year that resulted in the cancellation of 120 domestic flights and the inconveniencing of 18,000 passengers. Operations at 49 domestic airports were affected.

ASEAN ambitions
ANA is keeping a careful watch on the ASEAN (Association of Southeast Asian Nations) and is increasing its presence in the region. The carrier resumed flights from Narita to Myanmar’s Yangon airport in 2013 and is the only airline to offer direct services between Japan and the ASEAN member.
Last September, ANA added Narita to Phnom Penh, Cambodia’s capital, again providing the only direct air service between the two countries.
The airline has invested in a joint venture in Myanmar aimed at commencing international flights in 2018. The partners are ANA‘s Asian Blue Aviation Co. Ltd (49%) and Myanmar’s Shwe Than Lwin Co Ltd’s Golden Sky World (51%). Together, the investors have put an initial $150,000 into the start-up carrier. In August 2014, ANA dropped plans to acquire 49% of Myanmar-based Asians Wings, because it believed the market was saturated.
In 2016, ANA purchased 8.8% of Vietnam Airlines for US$109 million. Between them, the two carriers operate 10 international and 25 domestic code share flights.

The second issue was problems with the Rolls Royce’s Trent engines that power the airline’s B787 fleet. ANA is the launch customer of the aircraft type and is the biggest operator of the airplane. It has 58 B787s in service and 25 more on order. It is essential to ANA’s operations.

“My biggest mission is to settle these shortcomings at our airport operations and our flight operations. I have to make ANA more resilient,” he said.

Hirako attends a weekly review meeting at the ANA Haneda Operations center, where reports from all airports in the network are analyzed. “After this meeting, which is at a very early hour, I make a point of visiting sites in our terminal to observe operations as they happen,” he said.

Hirako has extensive airport operations experience. He was ANA’s director of passenger services, Tokyo Airport Office, from July 2004 to April 2006. “I want our staff to find solutions through analysis and to prevent their reoccurrence,” he said.

Other challenges ANA faced, said Hirako, were North Korea’s threat to peace in Northeast Asia and the negative impact of Trump’s electronics ban on trans-Pacific traffic. Also of concern to the airline is the U.S. president’s threatened ending of the North American Free Trade Agreement (NAFTA). If reneged, it would force Japanese companies to retreat from Mexico, strangling demand for ANA’s Tokyo to Mexico City route, which opened on February 15 this year.

So far, no Japanese companies are known to have pulled out of Mexico, but there have been reports one company that had planned to set up in Mexico decided against the investment.

“We’ll need to keep an eye on what impact the new Trump administration will have,” said Hirako.

ANA also is monitoring the situation at Tokyo’s downtown Haneda Airport where 39,000 additional annual daytime international slots are planned to be introduced before the 2020 Tokyo Olympic and Paralympic Games. The allocation of those valuable slots is of great concern.

After a recent surge in inbound tourism, the Japanese government has doubled its 2020 forecast of arrivals to 40 million. To accommodate these visitors, the government plans major renovations at Haneda’s Terminal 2 (T2), until now a facility exclusively used for ANA domestic flights and its associate airlines.

Some of the terminal’s facilities will be upgraded to handle international flight requirements of customs, immigration and quarantine services, which will effect some domestic operations. In an area now used for aircraft parking, a detached boarding ‘island’ for domestic flights will be built on the north side of T2.

Always on ANA’s mind
“We’re obviously very interested in JAL’s next medium term plan. All we want is to see competition on an equal footing with JAL – not in any distorted circumstances. JAL has huge cash reserves, which gives them added financial strength, so we must keep our eyes open. Having said that, we have other competitors so we must do what we have to do to maintain competitiveness’ANA CEO, Yuji Hirako

Some domestic network improvements might be affected by the late delivery – the fifth delay to date - of the Mitsubishi Region Jet (MRJ). ANA Holdings is the launch customer of the jet, with an order of 25 of the home grown aircraft.

“As the inaugural customer of the much-delayed B787 we have a lot of experience in dealing with late deliveries,” said Hirako philosophically. “We will deal with the capacity shortages by leasing four B737-800s. Mitsubishi have assured us of delivery in 2020 and we are looking forward to operating the MRJ with its enhanced economic performance. In the meantime, we can manage.”

In March 2019, ANA intends to introduce the A380 between Tokyo and Honolulu. ANA route planners are studying the best rotations for the aircraft to be flown between the cities. They have yet to decide if the three planes will operate from Haneda or Narita.

“The route will provide a solution to a problem of redeeming frequent flyer miles for our passengers. Many customers travelling on business want to use their miles for Hawaii. These big aircraft will provide much needed capacity for customers who are frustrated by the difficulty of getting seats. We can offer a “virtuous circle” because securing seats with mileage benefits will become easier,” he said.

Another “big headache” Hirako faces is a forecast shortage of around 2030 cockpit crew as waves of pilot retirements fall due. To prepare for this eventuality, ANA has invested in flight training academies in Japan, Thailand and the USA.

“In Japan, we can count on some pilots joining us from the Air Self Defense Forces and the Civil Aviation College. We also have our own in-house training program and can recruit from abroad,” he said.

Construction of a facility for cockpit crew and cabin attendants near Haneda Airport also will provide airport passenger services, maintenance and cargo personnel training.

And then there is Japan Airlines, once described by a former JAL chairman as “ANA’s elder brother”. Now reformed, streamlined and smaller, JAL’s recovery from bankruptcy was assisted by government-guaranteed financing and corporate tax waivers, although it was not allowed to launch routes or invest in new businesses during its bankruptcy protection period.

ANA has lobbied strongly for a “a level playing field” to offset the “huge financial support” it claimed its rival has enjoyed. These restrictions on JAL ended on March 31 this year but as far as ANA is concerned that playing field has yet to be leveled.

A classical music lover, on his rare free evenings, Hirako likes to enjoy concerts or an opera with his wife.
Among his favorite composers are Wagner, Brahms and Bruckner. “One of the cultural highlights of our stay in New York was attending the “Ring Cycle” at the Metropolitan Opera House,” he said.